Tax news

The Senate, Wednesday resolved to override President Muhammadu Buhari’s veto on the constitution of the Federal Republic of Nigeria, 1999 (fourth Alteration, No.28) Bill, 2018 and Industrial Development (Income Tax Relief) Amendment Bill, 2018 respectively. This development followed the recommendations by Senate Technical Committee on Declined Assents to Bills By Mr. President and Commander-in-Chief of the Armed Forces of the Federation chaired by Senator David Umaru. The, bill, however, seeks to provide for the first time within which the President or Governor shall lay the appropriation bill before the National Assembly or House of Assembly, to encourage early presentation and passage of Appropriation Bills. It would be recalled that Buhari declined assent to the bill, saying section 2(b) and section 3(b) of this bill appear not to take full cognisance of the provisions of section 58(4) of the 1999 constitution. But the hallowed chamber took exemptions to Buhari’s ground for declining his assent wherein he cited section 58(4) of the 1999 constitution. The committee said, “For clarity, section 58(4) deals with mode of exercising federal legislative powers: general, particularly, the number of days to assent or decline assent to a bill. “It provides – “Wherein a bill is presented to the President for assent, he shall within thirty days thereof signify that he assents or that he withholds assent”. The 7-man committee, therefore, explained that the bill in essence seeks to make it mandatory for Mr. President and Governor of a state to cause to be prepared and laid before parliament, estimates of the revenues and expenditure of the federation for the next following year. The bill, according to the Senate committee, would also make the parliament to pass the appropriation bill before the commencement of the next financial year. The committee added, “The legislative intent behind this bill is to ensure that we run a normal financial year”. For the Income Tax Relief amendment bill, it seeks to allow companies that expand their operations in pioneer industry or product to apply for a new pioneer status. But Buhari declined assent to the bill on the following grounds: “That there are ongoing consultation by the Federal Ministry of Industry, Trade and Investment with other Ministries, Departments and Agencies (MDAs) on the tax holidays incentive regime for expansion projects, Investments in rural areas, as well as for Agriculture/Agro-processing to be concluded and pave way for presidential orders, or executive Bill’s for consideration and passage by the National Assembly. “That the consultations would result in fiscal measures that would greatly enrich the quality of the tax holidays incentive regime for these types of projects and investments. “That at the end, thaes fiscal measures when finalized, would be subsequently submitted to the National Assembly by way of presidential Executive orders, or executive Bill’s for consideration and passage into law by the federal legislature, in due course”. However, the Senate committee in reaction said, ” Mr. President, Distinguished colleagues, we wish to state here that the committee finds Mr. President’s observation on this bill rather simplistic. “Certainly, Mr. President’s overall intention to come up with legislative proposal that would stand the test of time, is commendable. “However, law-making cannot unjustly suffer in anticipation of a proposed legislation. “Above all, nothing stops Mr. President or anybody for that matter from proposing an amendment to an existing law or even a repeal of an existing law. “There is nowhere in the world where the President can propose to stop the law-making process by an executive fiat or order. “The President cannot withhold assent to a bill on the mere fact that consultations are on-going, which will enable him come up with a new bill”.   Source; Dailypost

The Senate has asked the Federal Government to consider increasing taxes on luxury goods and services to boost revenues. The Senate Committee on Finance made the recommendation on Tuesday during a plenary session. The committee also urged relevant agencies to continue exploring ways of generating additional revenues to reduce the government’s fiscal deficit. It said, “The Federal Government should harness the full optimal potential of the Federal Ministry of Mines and Steel Development in terms of revenue generation to minimize the level of borrowing. “The Federal Government should consider reducing the granting waivers and exemptions while ensuring that the Nigerian Customs Service personnel are at all oil terminals for accountability and the Federal Inland Revenue Service should consider increasing tax on luxury goods and services.” The committee said the 20 per cent operating surplus to be remitted by government-owned enterprises should be deducted at source. The Federal Government has been trying to raise revenues in the face of lower oil prices after the country recovered from a recession that slashed public finances, weakened its currency and cut spending on capital projects. The country, which has one of the lowest tax rates on the African continent, relies on crude oil sales for much of government revenues. In the past, the government had mulled the idea of raising taxes on luxury goods to 15 per cent from the current rate of five per cent, to boost its tax to GDP ratio to 15 per cent from six per cent between 2017 and 2020.   Source: Punch

The Federal Inland Revenue Service on Monday announced plans to automate collection of Value Added Tax from operators in the nation’s lottery and gaming industry. The Chairman, FIRS, Mr Babatunde Fowler, disclosed this in Lagos at a stakeholders’ meeting organised in conjunction with the National Lottery Regulatory Commission with lottery and gaming operators. He said in his welcome address that the automation would enable lottery players and bettors to pay VAT on each transaction made. “What we are trying to introduce today is aimed at improving the transparency, accountability and convenience in the payment of any taxes. We are automating tax collection in across various industries in the country,” he added The Director-General, NLRC, Mr Lanre Gbajabiamila, said the importance of strict adherence to tax laws could not be over-emphasised in view of Nigeria’s present economic challenges. “In the gaming industry, products and services are generally offered through agents who are commonly in direct contact with the players. The consumption of the products and services are taxable under the law,” he said. Industry operators, however, voiced concerns over the VAT on lottery and gaming services, saying it would hurt their businesses. The founder of NairaBET, Mr Akin Alabi, who spoke on behalf of lottery and gaming operators, faulted the mode of charging the VAT, saying it would drive customers away from operators’ platforms. He said, “There must be another mode of collecting VAT rather than from the top level, which is on every stake. Telling operators to pay from the stakes is almost impossible because what it means is that customers will leave our platforms. So, they will start looking for companies that are not regulated where they can place their bets; they will look for foreign companies. So, it is going to ruin our business. “Presently, I have little to lose. I am in the process of divesting all my interests in NairaBET because I just won election to the House of Representatives. But I don’t want to leave the industry in a mess; that is why I am passionate about it.” Alabi stated that the FIRS should have consulted operators before taking the decision to impose VAT and automate its collection. Responding, the FIRS boss, said, “Tax has to do with law and the law says that for every transaction that is VATable, five per cent should be charged. You have to be aware that we are automating collection in all industries. This is not a tax on the business, but on the bettors. “If you carry out foreign bets and you go through your banks to make the payment, you will also be charged VAT.” Fowler, while fielding questions from journalists on the sidelines of the event, said, “If somebody comes to bet N100, it becomes N105. I can assure you that it will not make them change their minds.”   Source: Punch

The Kaduna Refining and Petrochemical Company, one of the country’s crude oil refineries that is run by the Nigerian National Petroleum Corporation (NNPC), is one of the highest tax payers to the government of Kaduna State, Mr. Nasir el-Rufai, the state governor has said. According to el-Rufai, the refinery which capacity utilization remained at zero for most parts of the months in 2018, and was not refining crude oil despite receiving the commodity from its parent body, the NNPC, pays the state its taxes regularly. The governor in a statement from the NNPC yesterday in Abuja disclosed this to the corporation’s Group Managing Director, Dr. Maikanti Baru, during a courtesy call on him, he however did not disclose the type of tax the unprofitable refinery pays to the state. The NNPC’s monthly operations and financial report for December 2018, indicated that besides a profit of N2.957.33 billion recorded by the Kaduna Refinery in April 2018, all other months, it made losses. Notwithstanding, el-Rufai, said it paid its taxes promptly. He was also quoted to have stated in the statement signed by NNPC’s Group General Manager Public Affairs Division, Mr. Ndu Ughamadu, that the state would support the NNPC to build its Abuja-Kaduna-Kano (AKK) gas pipeline project. The governor described the AKK gas line project as a very important one to Kaduna, noting that the people of Kaduna were happy it would support the state’s power demands.   Source: bizwatchnigeria

Shell Petroleum Development Company (SPDC) and Shell Nigeria Exploration and Production Company Limited (SNEPCo) remitted $6.3 billion in 2018 to Nigerian government. The money which represented tax and production entitlement for the 2018 fiscal year and was paid to the Nigerian National Petroleum Corporation (NNPC), Federal Inland Revenue Service (FIRS), Department of Petroleum Resources (DPR), and the Niger Delta Development Commission (NDDC). The payments signified a 48 per cent increase from the 1.5 trillion naira the country earned in 2017, making it the second time in two years that Nigeria was grossing the largest revenues from the company. The payment also formed part of Shell’s Sustainability report which was released by the Group Chief Executive Officer of the Royal Dutch Shell, Ben Van Beurden. Beurden said: “Shell must remain at the forefront of the drive for greater corporate transparency. “We will continue to be more open about what we do and why we do it. We want to help people better understand Shell’s performance, values and principles. “These reports outline our approach and activities in the crucial areas of sustainability and our relationships with industry associations and governments”. The Nigerian National Petroleum Corporation (NNPC) received the lion’s share with payments in kind valued at $3.776 billion. FIRS received $1.286 billion in taxes, while the DPR received $1.253 billion from royalties and fees. The NDDC was paid fees totaling $81.5 million. The Shell Sustainability Report outlines Shell’s approach to sustainability and covers its social, safety and environmental performance in 2018.   Source:  Saamedia

The International Monetary Fund (IMF) has called on the federal government to end fuel subsidies in the country. It also urged them to create a timeline to recapitalise weak banks in the country. Concise News understands that the IMF said this at the conclusion of the IMF Executive Board 19 Article IV Consultation with Nigeria. Also, it expressed its support for the government’s plans to reform and raise value-added tax (VAT). “They welcomed the authorities’ tax reform plan to increase non-oil revenue, including through tax policy and administration measures,” IMF directors said in a statement. “They stressed the importance of strengthening domestic revenue mobilization, including through additional excises, a comprehensive VAT reform, and elimination of tax incentives. “Directors highlighted the importance of shifting the expenditure mix toward priority areas. They welcomed, in this context, the significant increase in public investment but underlined the need for greater investment efficiency. “They also recommended increasing funding for health and education. They noted that phasing out implicit fuel subsidies while strengthening social safety nets to mitigate the impact on the most vulnerable would help reduce the poverty gap and free up additional fiscal space.” The IMF directors “welcomed the decline in nonperforming loans and the improved prudential banking ratios but noted that restructured loans and undercapitalized banks continue to weigh on financial sector performance.” Also, they suggested, “strengthening capital buffers and risk-based supervision, conducting an asset quality review, avoiding regulatory forbearance, and revamping the banking resolution framework. “Directors also recommended establishing a credible time bound recapitalization plan for weak banks and a timeline for phasing out the state-backed asset management company AMCON.”   Source: Concise

The Federal Government plans to finance Nigeria’s N1.859tn budget deficit in 2019 by introducing new taxes and adopting a concessionary financing system under its privatisation programme. The government also stated that the projected deficit, at 1.33 per cent of the Gross Domestic Products, was still within the threshold stipulated in the Fiscal Responsibility Act 2007. This was contained in the presentation by the Minister of Finance, Zainab Ahmed, before the House of Representatives Joint Committee on the 2019-2021 Medium Term Expenditure Framework and Fiscal Strategy Paper in Abuja on Tuesday. The panel is made up of the Committees on Finance; Appropriations; and Aid, Loans and Debt Management. Ahmed said the government had designed a new strategy for revenue growth to ensure a sustainable revenue flow system. She added that the ministry was in talks with the Federal Inland Revenue Service to identify new taxes, while the Treasury Single Account policy implementation would be extended to foreign accounts operated by government agencies. The minister said, “We have identified new revenue streams and we are working to tap into them, especially the identification of new taxes for which we are working with the FIRS to bring that to fruition, of course with an amendment to relevant tax laws. “We are working now to implement the TSA to cover foreign accounts operated by government agencies in order to broaden the net and minimise leakages.” According to the document presented by the minister to the committee, the budget deficit is to be financed mainly by privatisation proceeds of N210bn and N1.649tn borrowings, with “a shift away from commercial to concessionary financing.” Half of the borrowings, N824.82bn, would be sourced from domestic sources, with the other half from foreign sources. Also, the Director-General, Budget Office of the Federation, Mr Ben Akabueze, said Nigeria was expected to continue to experience growth from 0.8 per cent in 2017 to 2.1 per cent in 2018 and 3.01 per cent in 2019, after emerging from recession in the second quarter of 2017. Akabueze said, “As of the end of 2018, Federal Government aggregate revenue was N3.96tn, which is 55 per cent of the budget and which is higher than the 2017 revenue.” He gave the breakdown as oil revenue of N2.32tn, which is 77 per cent of budget and 64 per cent higher than 2017; Company Income Tax of N637.25bn, which is 80 per cent of budget and 1.7 per cent higher than 2017; and Customs Collection of N303.91bn, which is 94 per cent of budget and 16 per cent higher than 2017. He said, “Notwithstanding the softening in the international oil prices in late 2018, the considered opinion or view of most reputable oil industry analysts is that the downward trend is not necessarily reflective of the outlook for 2019. Currently, the average Brent oil price projection for 2019, by 32 different institutions with relevant expertise, is still about $69 per barrel.” Akabueze assured Nigerians that the government would continue with its fiscal strategy of directing resources to most productive and growth-enhancing sectors, while efforts would be intensified to increase revenue. He added that the government would equally leverage private capital to supplement capital allocation from the budget. He stressed, “We will closely monitor the situation and will respond to any sustained changes in the international oil price outlook for 2019. Mr President has directed the Nigerian National Petroleum Corporation to take all possible measures to achieve the targeted oil production of 2.3 million barrels per day. “The budget proposal seeks to continue the reflationary and consolidation policies of the 2017 and 2018 budgets, respectively, which helped put the economy back on the path of growth.” In his presentation, the Executive Chairman, FIRS, Mr Babatunde Fowler, stated that the tax office was optimistic about performing better than 2018 He said, “For the year 2018, the Federal Government gave the FIRS a collection target of N6.747tn. Analysis of actual collection figures for the year ended December 2018 shows that we collected a total of N5.320tn, which represents 78.86 per cent of the target. “The FIRS 2019 – 2021 Revenue Framework is based on the 2019 – 2021 MTEF and FSP. While the collection figure for 2018 was significantly higher than ever before, the FIRS is not resting on it oars and is continuing with the implementation of various measures to ensure that tax revenue collection significantly improves further in 2019.” Such measures, according to Fowler, include Strategic Revenue Growth Initiative, tax audit, use of technology such as VAT Auto Collect, State Offices of Accountant-General Platform, integration with GIFMIS for Federal Government MDAs, e-Service and mobile payment options. Others, he said, were sustained enforcement activities, Voluntary Assets and Income Declaration Scheme and amendment to tax laws to improve collection. On his part, the Comptroller-General, Nigeria Customs Service, Col. Hameed Ali (retd.), said there were strategies to actualise the 2019 budget target, stating that, “Every opportunity that will help in attaining the target shall be employed.” Ali said, “The proposed automation of all forms of manual payment in every Customs formation is geared towards enhanced revenue and budget performance. This approach will certainly culture the integrity and sanity of service operations.” “There shall be a holistic assessment and monitoring of all revenues collected on behalf of the service by the various designated commercial banks. This will create an avenue for genuine reconciliation of all accrued revenues against claimed remittances to the various designated government accounts.” The Customs boss also noted that the strategy would also guide against diversion of any collectable revenue.   Source: Punch